Internal Legitimacy Crises: The Roles of the Regulatory Focus and Relational Social Capital of Headquarters and Subsidiaries

Purpose:
The purpose of this paper is to further the understanding of how the regulatory foci of the multinational enterprises (MNE) headquarters and the subsidiary lead to internal legitimacy crises. This paper discusses how pragmatic and moral legitimacy crises affect relational social capital.

Design/methodology/approach:
The paper is conceptual.

Findings:
This paper highlights the importance of internal legitimacy as well as the motivational orientations of headquarters and subsidiaries for the functioning of MNEs. Internal legitimacy management is crucial for building relational social capital. This study proposes that legitimacy crises are particularly likely to occur in cases of goal incongruence between headquarters and subsidiaries. This study postulates that organizations with a promotion-oriented institutional logic are concerned by the absence of pragmatic legitimacy processes. In contrast, given their aim of protecting the status quo, prevention-oriented institutional logic MNEs are concerned about the absence of moral legitimacy.

Originality/value:
To the best of the authors’ knowledge, this paper is the first to explore the relationship between regulatory focus, internal legitimacy and relational social capital.